The New York, New York, hotel market reported negative results in each of the three key performance measurements for the first quarter of 2015, according to data from STR, Inc.In year-over-year comparisons, occupancy in New York City decreased 0.2 percent to 75.2 percent; average daily rate fell 4.1 percent to US$204.18; and revenue per available room dropped 4.3 percent to US$153.63.
The decline in occupancy came as first-quarter room supply (+3.1 percent) outpaced demand in the market (+2.9 percent) in year-over-year growth.
As expected, overall performance for the market was down when matched with prior year comparisons, which included hosting Super Bowl XLIV in February 2014. Inclement weather in the Northeast also slowed travel during the early months of 2015.
All STR Chain Scale segments in New York City, including Independents, experienced ADR declines for the first quarter of 2015. The Upper Upscale segment, which accounts for nearly one-quarter of market room supply in New York City, remains US$33.00 below its 12-month trailing ADR peak (US$313.62) reached in September 2008.
In 2014, New York City saw a 5.5-percent year-over-year increase in supply, but demand grew at a higher rate of 6.0 percent. As a result, occupancy in New York City rose to 84.8 percent—the highest annual occupancy STR has ever recorded for the market, according to Bobby Bowers, STR’s senior VP for operations.
Despite the record occupancy, ADR for the year increased 1.8 percent to US$263.45. For three consecutive years, New York City has failed to produce ADR growth consistent with the market’s long-term annual average of +3.7 percent.
“It’s hard to determine what’s holding back ADR growth in New York City,” Bowers said. “Obviously, annualized room supply growth is significantly above normal, but demand growth has been even stronger, and occupancy levels are near all-time highs. Revenue management decisions made at the hotel level are reflected in the market’s performance—we’ll see how those decisions play out in the coming months.”
STR expects New York City supply growth to peak in 2015 but continue to increase well above the long-term average at more than 5.0 percent in 2016. The current forecast also calls for occupancy declines in 2015 and 2016, with below-trend ADR growth. Longer term, STR expects lower supply increases after 2016 and a return to near-trend ADR growth.